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Angel investing went out of fashion with the dotcom bust. But the renewed interest in the internet and the rise of tech millionaires has spawned a new set of angels. SAHAD P.V.
informal interaction between five or six of them, but has since taken a formal shape with its registration recently as a company called The Band of Angels. It has even found its first investment: A hospitality software-maker Knowcross, founded by Nikhil Nath. Says Srivastava, a founding member of the band: We are looking to grow to 50 members with a panIndia presence in the next two years. God speed is what Indias entrepreneur wannabes should be saying. Angel investing, or whatever little of it has existed in India, has been an unorganised and random business. Offering seed money and advice, which is largely what angels do, has been up to a handful of wealthy and well-meaning individuals. At the most, one or two persons came together, pooled in money and invested in a start-up. In contrast, venture capital (VC) or private equity investing has thrived because it is a well-structured industry. In fact, thanks to high stock market valuations, the VCs who had sworn off start-ups after the dotcom crash, are back looking at small companies. Still, the smallest investment a VC would want to make is about $1 million or Rs 4.5 crore, whereas an angel investment ranges between, say, $1,00,000 or Rs 45 lakh and $1 million (Rs 4.50 crore). (Even Google, now a $111-billion-inmarket-value company, was kick-started with $1,00,000 from angel and Sun Microsystem cofounder Andy Bechtolsheim.) Says Srivastava: We really dont have a layer of angel investors in India. There is a reason for it. Angel investing is generally done by first-generation entrepreneurs or rich technocrats. Venture capital, in contrast, is run by investment professionals. In India, first-generation entrepreneurs are only a decade-or-two old, so its only now that the people whove made money building and selling companies are turning to angel investing. Take Saurabh Srivastava and Mohit Goyal. The two set up IT services firm IIS Infotech in 1989 and cashed out in 1998 when British firm Xansa bought it for some $50 million, turning them into multimillionaires (together they pocketed nearly Rs 200 crore). Srivastava is now the non-executive Chairman of Xansa, President of T i E s (The Indus Entrepreneurs) Delhi Chapter, and serves several positions on government committees. Goyal, on the other hand, has been leading a semi-retired life at his Panchsheel Park bungalow in Delhi, except for serving as a director on the boards of Xansa and

Meet The Angels

There are about 20 of them, mainly from IT.
Aadesh Goyal, Head of HR, Felxtronics Software Systems: A C-DoT veteran and part of FSSs start-up team. Alok Mittal, Partner, Baring Private Equity Partners India: Co-launched Jobsahead.com and sold it to Monster. Alok Prasad, President, Beacon Technology Ventures: A TiE member, and invests in India through BVG Advisors. Arun Kumar, MD, Flextronics Software: He has been heading FSS since 1995. Ashok Trivedi, Chairman, iGate: Was instrumental in building iGATE Corporation. Sanjiv Kaul, MD, ChrysCapital: Spent 20 years with Ranbaxy, part of it in China.
Alok Mittal

Rohit Chand, Co-founder, IT&T Group: Cofounded IIS Infotech and sold it to Xansa. Sanjay Bhargava, Ex-Paypal: He is now an angel investor and an advisor. Dan Sandhu, CEO, Vertex: A Briton, he is also an active member of TiE in Delhi.

Raman Roy

Deepak Bagla, President, Citigroup: He was in the US before joining the bank. Mohit Goyal, Director, Xansa and Scicom Technologies: An IT veteran, he co-founded IIS Infotech.

VIVAN MEHRA

Jerry Rao

No halos, but angels all: (Standing L to R) Flextronics Arun Kumar, Cybermedias Pradeep Gupta, Xansas Saurabh Srivastava, IT&Ts Rohit Chand, Scicoms Mohit Goyal and investee company Knowcross Nikhil Nath (seated)

Saurabh Srivastava, Executive Chairman, Xansa: Co-founded IIS Infotech; and is industry grey eminence.

Som Mittal, Managing Director, Hewlett-Packard GlobalSoft: Another industry veteran with stints in Compaq and Wipro. Jerry Rao, Chairman & CEO, Mphasis: Prior to founding Mphasis in 2000, headed Citibank in India. Raman Roy, Founder, Spectramind: A BPO pioneer, Roy sold Spectramind to Wipro in 2002 for Rs 400 crore. Pradeep Gupta, Chairman, Cybermedia Group: He set up Cybermedia, a specialty publications group, in 1982. Naresh Trehan, Executive Director, Escorts Heart Institute: A top heart surgeon, he is setting up a $250-million hospital. Pramod Bhasin, President & CEO of Genpact: He built GEs backoffice in India and oversaw its sale in 2004. Gopal Krishna, Country Manager, Pipal Resarch: He was founder-chairman of ThinkIndia, bought by Rediff.
Note: Not a complete list

Band Of Angels
T
HEY ARE A BUNCH OF MEN WHO HAVE BEEN

there and done that, and now they want to help others live the dream that they have livedof turning entrepreneurs. They are the Band of Angelsa group of 20 men (so

far) that struck gold either building or running companiescomprising hi-profile tech executives like Jerry Rao, Raman Roy, Saurabh Srivastava, Arun Kumar, Som Mittal, and Alok Mittal (see Meet The Angels). The group started off about a year ago as an

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The Other Angels

HERES BEEN A HUGE REVIVAL IN ANGEL INVESTING OVER THE

last six to 12 months, especially in the areas of mobile telephony and convergence, says Vish Akela, a Silicon Valley-returnee, who is now funding a handful of budding entrepreneurs like 26-year-old IIT Delhi-grad Varun Khuranas Wirkle, a mobile entertainment company. Recently too, Mahesh Murthy (formerly of Passion Fund), Pravin Gandhi and Bharati Jacob (both from Saurabh Srivastavas Infinity Venture Fund) formed a $10million (Rs 45-crore) angel fund called Seed Fund. The fund is expected to be closed in April, and will invest between Rs 1 crore and Rs 2.50 crore. Kanwal Rekhi a man who struck it rich in Valley and who helped launch the The Indus Entrepreneurs (TiE)himself is raising a $150-million (Rs 675 crore) fund that will invest in a range of start-ups. We feel that the post-bubble funk in Silicon Valley has fully dissipated and the entrepreneurial activity is hitting a full stride here, says Rekhi. Money apart, TiE has set up an Entrepreneurship Acceleration Programme (EAP) and has roped in tech entrepreneurs such as Subhash Menon of Subex Systems and venture fund Jumpstartups Sanjay Anandram to contribute. Says Sridhar Mitta, Chairman of e4e and head of TiEs Bangalore Chapter: Many Indians have been able to start businesses in Silicon Valley easily because (an angel eco-system) is present therewe want to foster this spirit (in) India. Initially, TiE expects to support as few as five business proposals, although Mitta expects to receive as many as 100 plans in the next few months. While Rekhis $150-million fund stands out for its sheer size in this space, there are other individuals like serial entrepreneur Prakash Bhalerao, iLabs Srini Raju, and US-based Euclids Sateesh Andra doing their bit to help young entrepreneurs. Andra, for instance, has helped launch a company in the consumer internet space by investing Rs 1 crore out of his own pocket. A member of TiE, Andra is also a limited partner (read: investor) in two VC funds with focus on early-stage investing. At an angel investing stage, it is not just funds butone needs to mature an interesting idea and take it to the next level, he says.
RAHUL SACHITANAND IN BANGALORE AND E. KUMAR SHARMA IN HYDERABAD

Scicom (the latter is a scientific software company that he and Srivastava angel-funded). Raman Roy, too, hit pay dirt after selling off Spectramind to Wipro in 2002 for Rs 400 crore. Last year, he invested in a market research services and analytics company, Annik Technologies and now, armed with a war chest of $200 million or Rs 900 crore, is looking to buy out a BPO. Alok Mittal too, a young middle class IITian, became a millionaire when he sold (along with his partner Puneet Dalmia of Dalmia Cement family) Jobsahead.com to Monster for $9 million or Rs 40.5 crore. Therefore, the emergence of rich technology entrepreneurs and successful professionals in India has spawned organised angel investing. The Band of Angels (BoA), conceived some time in February 2005 (its a concept borrowed from a group of angel investors in Silicon Valley also called the Band of Angels; see The Valleys Angels), has now taken a formal shape. In October, the group was registered as a private limited company. Now it is looking at building a secretariat and is scouting for a professional to head it.

funk in Silicon Valley has fully dissipated and the entrepreneurial

We feel the post-bubble activity is hitting a full stride here
Kanwal Rekhi / Angel Investor

Institutionalising Angels
BoAs aim is to scale up angel investing from an individual effort to an organised group activity. This has several advantages. First, you can invest in not one start-up a year, but in several start-ups. Second, you can take advantage of the collective wisdom of a large group of investors rather than relying on your own hunch to make the investment decision. For an individual, angel investing requires a lot of effort in identifying and screening the right deal, due diligence, administration, mentoring and finally making the exit. Your deal flow can be as slow as one deal in two years. But BoAs model is designed to provide both scale and diversification. BoA wont be investing big money in start-ups. Typically, it will put in Rs 1 crore per company. But angel investment is at the top end of risk pyramid. So, the typical profile of the person who joins the band is that of a multimillionaire and someone who has the stomach for risky ventures (the success rate for

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The band welcomes only those members who can commit some time for mentoring, besides a commitment to invest at least Rs 25 lakh a year in pool fund plus Rs 50,000 a year towards administrative costs
angel investing is just 20 per cent globally). However, to the duo. Nath got to make a presentation before the it is not just about capital. Its about nurturing the en- band sometime in June. On behalf of the band, Goyal trepreneur, and handholding him through the most dif- took the initiative to consult other members (finally ficult early stage to the first round of VC funding in one seven of them decided to invest), got all the transacor two years, says Alok Mittal, co-founder of tion processes like valuation, due diligence, customer Jobsahead and currently a partner at Baring Private reference checks done and closed the deal. In Equity Partners India. Our experience of having done November last year, the seven angels signed the term it once helps the entrepreneur. So, essentially, the sheet with Knowcross. Goyal represents BoA on the band welcomes only those members who can commit board of Knowcross, while all seven remain as indisome time (usually a day in a month) for mentoring, besides a commitment to invest at least Rs 25 lakh a year, plus Rs 50,000 a year towards administrative costs. Not surprisingly, BoAs inspiration comes from Silicon Valley. But we will not want to welcome NDIAS BAND OF ANGELS IS FASHIONED AFTER THE only money, clarifies Mittal. Band of Angels in Silicon Valley. Its a formal BoA, however, offers flexibility group of more than 100 former and current to its members. Its not binding on high-tech executives who invest their time and every member to invest in a commoney into new, cutting edge, start-up company the band finally selects. Here is panies. The members have either founded how the system works: Start-ups companies like Symantec, Logitech, and National Semiconductor or have and entrepreneurs need to convince been senior executives at giants such as Sun Microsystems, Hewlett at least one member of the band, Packard, and Intuit. The Band meets every month and considers three startwho fine-tunes the plan, and finally ups short-listed from some 50 that are screened each month by a Band Deal sponsors the proposal. The band Selection Process. It has seeded 164 start-ups with an investment of will meet every two months (the $117.2 million (Rs 527.4 crore) ever since it was set up in 1994. There frequency can change depending have been seven IPOs and 42 profitable acquisitions as exits for the on the deal flow) and consider four Silicon Valley BoA. The Indian clone, then, has a tough act to follow. or five proposals. Each entrepreneur gets 30 minutes to make the presentation, including 10 minutes for questions and vidual shareholders. A nice arrangement. BoA is seeking proposals from IT, ITES, high-end answers. Its likely that only a few of all the angels gathered there may be impressed with a proposal. That, BPOs, embedded technology, retail and so on, but however, is not a problem under BoAs system. There theres one pre-condition: They should be businesses is no quorum required for making the investment that break even quickly. This may change as BoAs decision. Therefore, even a single member, if he so membership profile changes. As of now, all the BoA members have a technology/ITES background. BoAs wants, can go ahead and invest in the start-up. Take the case of Knowcross, BoAs first invest- investment horizon can range from two to five years, ment. The company is promoted by Nikhil Nath, a with an exit happening either at the first VC round or at former VC himself (he was a partner at Antfactory), the IPO stage. But BoA doesnt intend to be Delhi-centric. and makes guest management software for the hotel It already has members from Mumbai (Jerry Rao and industry. He was already revenue positive (Knowcross Som Mittal), Bangalore and even Silicon Valley. So, the has clients like Oberoi and Hyatt Global), but needed idea is to be location-agnostic. We see a lot of start-ups a small amount of capital (about $500,000 or Rs springing up on Mumbai-Pune and Andheri-Malad 2.25 crore) to take the company to the next level. He corridors, says Rao, who plans to expand BoAs presknew Umen Bewtra, one of the associates of Saurbah ence in Mumbai. Finally, young entrepreneurs will Srivastava and Mohit Goyal, who introduced him no longer need a miracle to be blessed by an angel.

The Valleys Angels

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